The suburbs of Philadelphia are beginning to catch up with the demand from multifamily households.
The real estate community is going with a long term approach to the suburbs, looking past the immediate downturns of the markets and focusing their attention on future market cycles. The real estate community is looking further into the future to decide what moves to make.
Suburban communities have shown they can handle more density and development than previously thought possible. Developers know that taking a project from the drawing board to a finished product is a long and laborious process, forcing them to look at the big picture and plan further ahead.
“Before you even get a shovel in the ground, it’s four years,” BET Investments President Michael Markman said. “In the last four years, my construction costs went up 20%, and my pro forma from then is crap. My retailers who used to expand like crazy are not expanding anymore; I have to look at different retailers, restaurants.”
The King of Prussia Town Center, which has been praised as a huge success, had a very rough time in the planning process. Korman Communities CEO Brad Korman said. “It’s a home run, and it still took us 17 years to get one town center done really well.” Dranoff Properties went through a similar experience developing One Ardmore Place. Legislation ballooned the cost by almost $20 million dollars and delayed the building process by nearly ten years.
Developers have become aware that a project in its planning phase will look completely different when it comes to fruition. “The key is not just having time and good backers; it’s also flexibility,” Markman said. “Keep to your core competencies, but you need to able to change to adapt to the market. If you’re lucky, in seven years you have tenancy. If you’re unlucky, you’re bankrupt.”
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